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UAE rules out talks to re-enter GCC monetary union

Central bank governor says no 'negotiations' are taking place to rejoin the single currency.

By Tom Arnold

Tue 26 May 2009 12:19 PM

The UAE is not “negotiating” to re-enter the GCC monetary union after pulling out of the project last week, the central bank governor said on Tuesday.

“We are not negotiating, for the time being our position is to withdraw,” said Sultan Bin Nasser Al Suwaidi at a Ministry of Labour event to launch a new wage protection system in Abu Dhabi.

The UAE pulled out of the single currency on May 20 because of a decision to base the union’s central bank in the capital of Saudi Arabia rather than the UAE.

Al Suwaidi's comments come on the same day as the UAE minister of state for foreign affiars also reiterated the country's unwillingness to enter into talks on its withdrawal from the single currency.

Anwar Mohammed Gargash told the Kuwait News Agency (KUNA) that the UAE did not need any mediation with its fellow GCC countries over the decision.

It already had open communication with the other five GCC members and that “having different views on some issues is a normal matter”, Gargash said.

"The UAE views that the procedures followed to select the location were not right. Therefore, it demanded, through an official memorandum, to halt discussions on the matter,” he told KUNA.

“The UAE opted not to raise the issue with brothers in order for them not to take a negative turn," Gargash added.

Meanwhile, Al Suwaidi said that the UAE’s banking system was improving after suffering from liquidity issues at the start of the year, when the global economic crisis started to impact on the region.

Bank loan to deposit gaps were coming down across the Emirates, he said, but added that further reductions would depend on international markets.

“It is going down gradually and it is going to be eliminated,” he said.

EBOR – the rate at which rate banks charge each other for loans – was also coming down, Al Suwaidi added.

Asked whether the central bank was considering cutting interest rates any further, he replied that it would depend on circumstances.

But added: “Given that they are down to one percent per annum for official rates at the central bank, that’s a good rate.”

More corporate bonds could be on the way for privately-run firms, depending on their individual circumstances, the availability of liquidity in the market, and the international markets improved, Al Suwaidi commented.

However, whether bonds would be issued for government-related entities was a different matter, he said.

The UAE Central Bank is working closely with the ministry on the wage protection system.